1. Technical Field
The invention relates generally to electronic checks processing. More particularly, the invention relates to a method and apparatus for automatically converting checks to ACH debits.
2. Description of the Prior Art
Due to recent changes in the Automated Clearing House (ACH) by the National Automated Clearing House Association (NACHA), billers may now convert consumer checks that have been mailed to a lockbox into electronic ACH debits providing the biller has provided notice to the consumer. It is a difficult process to separate consumer checks from ineligible items, and, for consumer checks that are eligible for conversion, to correctly interpret and convert the on-us field of a Magnetic Ink Character Recognition (MICR) line into the correct format for an ACH debit. It has been found that, typically, items that are decisioned incorrectly, or parsed incorrectly, result in ACH administrative returns, wherein the returns simply state that the account number is invalid.
Currently there are three primary applications for electronic check conversion to ACH debits: re-presented check entries (RCK), point of sale (POS), and retail lockbox, or accounts receivable check truncation (ARC).
Identifying Items Eligible for ACH Conversion.
Only consumer checks are eligible for conversion to ACH debits. Therefore, there must be a method in place for separating such eligible conversion items from money orders, travelers checks, cashier's checks, convenience checks (credit card balance transfer checks), commercial checks, government items, and the like, which are ineligible for conversion.
Linking the MICR Line with the Demand Deposit Account (DDA).
Currently, there is no standard for how or where identifying numbers appear in the MICR lines of checks. The bank routing and transit number, although standardized, must be identified and captured within the MICR line. The check sequence number and account number must be identified, separated, and captured in the correct order. This is difficult not only because they may appear in various positions within the on-us fields of the MICR line but also because some financial institutions require a different account number for an ACH debit than they do for a check.
In the case of credit unions using payable-through banks for check processing, the routing/transit number on the check MICR line is that of the payable through bank. The actual account number will likely contain a credit union identifier plus the account number. In order to convert a credit union payable-through draft to an ACH transaction, the R/T number must be changed to that of the credit union, and the credit union identifier must be removed from the account number.
Solving such data parsing challenges greatly reduce exception items, improve collection rates, improve processing quality, and satisfy consumer payment posting expectations.π involve electronic payments, as follows.
Carlson, Steven R. and Carlson, Paul R., Point-Of-Sale Device Particularly Adapted For Processing Checks, U.S. Pat. No. 5,053,607 (Oct. 1, 1991) disclose a check processing device that is particularly adapted for retailer/customer use at the point of sale through use of a MICR read head means, printer means and keypad means which feed information into a CPU which communicates, through an existing telecommunication system, with the customer's bank and the retailer's bank in order to transfer funds from the account of the customer to the account of the retailer.
Hills, Robert R. and Nichols, Henry R., Checkwriting Point Of Sale System, U.S. Pat. No. 5,484,988 (Jan. 16, 1996) disclose a point of sale system designed to read information from a consumer's check, credit card, or manual input with a subsequent debiting of a consumer's account and crediting a merchant's account for the goods or services provided. Point of sale terminals are designed to accept a form of credit card with a consumer's bank account information encoded thereon or in the alternative to read the MICR number from a consumer's check in order to verify that a consumer has an appropriate balance to conduct the transaction with a given merchant. Thereafter the transaction of that information is transmitted to a central computer system which verifies the consumer's credit worthiness and stores the transaction event information for subsequent bank reconciliation via the ACH network. The invention eliminates the need for paper checks with all bank reconciliation being accomplished electronically.
Hills, Robert R. and Nichols, Henry R. Checkwriting Point Of Sale System, U.S. Pat. No. 6,164,528 (Dec. 26, 2000), Checkwriting Point Of Sale System, U.S. Pat. No. 6,283,366 (Sep. 4, 2001) and Checkwriting Point Of Sale System, U.S. Pat. No. 6,354,491 (Mar. 12, 2002) disclose, in addition to the above summary, the disclosure includes fraud protection provisions such as velocity controls, social security checks, and scans. It claims to have the further flexibility to differentiate between “first time” consumer usage and those limits otherwise assigned to “known” consumer accounts. Additionally, there is not need for the system to retain the consumer's check after verification.
Weiner, S., Electronic Payments in the U.S. Economy: An Overview, Federal Reserve Bank of Kansas City, Economic Review—Fourth Quarter 1999 discloses an overview of e-payments as they exist at that point in time in the U.S., including cash and check usage, credit and debit cards, wire transfers and ACH transactions, and e-money.
Curley, B, First Union Division Offers Check Processing At POS, Bank Systems+Technology, vol. 36, no. 5 p. 40 (May 1999) discusses First Union offering electronic check processing at the point of sale (POS), where consumer checks are scanned at the POS using a check reader, such as an IVI Checkmate unit, which sends the MICR data through a dial-up network to BankServ, a San Francisco-based check processor. BankServ compares the check information against negative databases like Deluxe's SCAN. The cashiers are notified within seconds if a check comes up bad; otherwise, BankServ sends the item for payment via ACH. Consumers receive a canceled check back at the POS, except for the first time they use a check for payment, when it is retained as a source document for the bank.
It would be advantageous to provide a system and method that ensures that every item eligible for ACH conversion is converted and collected successfully.
It would further be advantageous to eliminate administrative return processing resulting from the lack of MICR line standardization.
It would further be advantageous to provide a system and method that provides an ACH directory of the tens of thousands of routing and transit (R/T) numbers which identifies which R/T numbers are eligible for conversion, the R/T number and account conversion parameters, the formats of the on-us MICR line, and the ability to correct originated transactions.
It would further be advantageous to store notifications of change that are sent by receiving financial institutions to update future originated transactions.
It would further be advantageous to design a complete administrative return processing technique that allows for correcting and re-originating items (repair and re-originate converted ACH transactions) on behalf of customers without having the customers work on the return and store the repaired transaction data to update future originated transactions.